California Foreclosure Starts Lowest in Six Years

The number of California homeowners who began the foreclosure process in the fourth quarter last year dropped to its lowest level in six years, according to figures from DataQuick.

Lenders recorded a total of 38,212 notices of default on California houses and condominiums last quarter, down 22% from the prior quarter and 38% less than a year ago. The latest quarterly numbers are the lowest statistics since 37,994 notices of default were documented in 4Q 2006.

DataQuick attributed a rise in home values, an improving economy and a shift toward short sales for the overall decline in foreclosure activity.

The median price paid for a home last quarter was $300,000 in California, up 22% from the same time period in 2011. Meanwhile, short sales made up an estimated 26% of statewide resale activity in the fourth quarter.

“Home values increased through most of 2012, and the rate of increase picked up toward the end of the year. That means fewer and fewer homeowners are underwater, meaning they can sell and pay off the mortgage, or perhaps refinance at today’s low interest rates,” said John Walsh, president of DataQuick. “This trend alone suggests we’ll see a continued decline in foreclosure rates this year.”

Notice of default filings fell in all home price categories last quarter, but the most defaults occurred in California’s most affordable neighborhoods. ZIP codes where the median sale prices were below $200,000 saw approximately 5.5 NoDs filed for every 1,000 housing units. Meanwhile, the ratio of defaults was 3.5 per 1,000 homes for areas with home values between $200,000 to $800,000, and there were 1.3 defaults filed for every 1,000 homes for neighborhoods whose homes sold above $800,000.

The San Diego-based real estate information provider said most of the loans going into default were from the 2005-2007 period.

Of the state’s larger counties, mortgages were least likely to go into default in San Mateo, Santa Clara and Marin counties, DataQuick said. The probability was highest in Yuba, Madera and Tulare counties.

On primary mortgages, California homeowners were a median eight months behind on their payments when the lender filed the notice of default. The borrowers owed a median $14,364 on a median $308,885 mortgage.

For home equity loans and lines of credit in default, borrowers owed a median $4,693 on an average $77,187 credit line.

The trustees who pursued the highest number of defaults last quarter were NDex West (mostly for Wells Fargo), Cal-Western Reconveyance, also on behalf of Wells Fargo and Quality Loan Service Corp representing Bank of America.